With expectations of liberalised foreign investment norms being belied, poor liquidity and falling profitability, media companies have almost failed to keep the stock market entertained. The 19 media companies listed on the bourses lost between 88 per cent and 47 per cent in market capitalisation since the Sensex peaked in January this year.

In absolute terms, the 19 companies including HT Media, TV Today, NDTV, TV 18, Zee Entertainment and Sun TV, saw a value erosion of a staggering Rs 50,285 crore in the last 11 months. While the Bombay Stock Exchange’s benchmark index, Sensex, plunged 56.4 per cent since its January 8 peak, media stocks have cumulatively lost 71.5 per cent in market capitalisation.

According to Anup Bagchi, Executive Director, ICICI Securities, “In a slowdown, media spends are among the first ones to get rationalised. And that is the reason for the faster-than-normal contraction of this sector. While short-term spends gets immediately rationalised, the medium- to long-term contracts run their course. Hence, profit changes lag the price movements of shares both on the upside and the downside.”

M K Sharma, Head of Research, Anagram Stock Broking said, “When the stock market was doing well, these stocks were quoting at a premium compared to the market price-earnings ratio. There was a lot of expectation about foreign investment coming into the sector. New deals were expected to happen, but they did not materialise, hence the steep fall.”

While the sector’s revenue growth continues: year-on-year revenue growth in the second quarter for all media stocks was 29.6 per cent, what has been hit is profitability: year-on-year net profit for Q2 fell 48.6 per cent. The steep fall in profitability is largely because of a 41.7 per cent rise in expenses. Within expenses, rising interest costs — that shot up 78.2 per cent year-on-year for Q2 — seem to have done the damage.

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